BANGKOK (Reuters) - Thailand’s central bank and Japan’s finance ministry agreed on Friday to promote direct settlement of transactions in their local currencies, the latest move by Asian economies to reduce exposure to volatile global markets.
The two signed a memorandum of understanding on a framework of cooperation to promote use of their local currencies for bilateral trade and investment settlement, including direct exchange rate quotation and interbank trading between the yen and the baht, the Bank of Thailand said.
“This collaboration marks a key milestone in strengthening bilateral financial cooperation between Japan and Thailand,” the BOT said in a statement.
A number of banks will be allowed to carry out such settlements, including Bangkok Bank, Krung Thai Bank and Sumitomo Mitsui Banking Corporation.
Japan is the biggest foreign investor in Thailand and the third-biggest market for Thai exports - it imported about $22.3 billion (16.2 billion pounds) worth of Thai goods last year.
Thailand also has similar agreements with the Indonesian and Malaysian central banks.
Many emerging economies face increasingly volatile financial markets and rising trade protectionism as well as capital outflows in the wake of rising U.S. interest rates.
Reporting by Orathai Sriring; Editing by Gopakumar Warrier